Michael Burry's Scion Asset Boosts Stake in Alibaba, JD, Baidu, Buys Put Options

Michael Burry, the renowned investor known for his prescient calls on the 2008 financial crisis, has recently increased his stake in Chinese tech companies through his hedge fund, Scion Asset Management. According to the fund's latest 13F filing, Burry boosted his position in Alibaba Group Holding Ltd. (NYSE:BABA) by 80% during the first quarter, making it the firm's top holding. Additionally, he added a further 50,000 shares to his position in Alibaba, increasing its total value to around $9 million. Burry also increased his stake in JD.com Inc. (NASDAQ:JD), making it his second-biggest position with a total value of around $11.16 million, consisting of 155,000 shares. Furthermore, he added a small $4.2 million stake in Baidu Inc. (NASDAQ:BIDU), with 75,000 shares valued at $6.49 million. These investments suggest that Burry is bullish on the Chinese tech sector and expects these companies to perform well in the near future.

Burry's increased investments in Alibaba, JD.com, and Baidu come as the market has been volatile and equities have bottomed out. The rebound in Chinese stocks, spurred by policymakers' efforts to stabilize the market and signs of improvement in earnings, has likely attracted Burry's attention. JD.com's US-listed shares have climbed more than 16% this year, while Alibaba's have increased about 4.5%. Baidu's American Depositary Receipts, which Burry added a small stake in, are still down 7% this year.

Burry's portfolio also shows a focus on healthcare and fintech, with significant positions in Molina Healthcare and Shift4 Payments. Additionally, he has exposure to real estate through Hudson Pacific Properties and emerging biotech through BioAtla. Other notable holdings include The RealReal, Olaplex Holdings, and American Coastal Insurance.

The investor's return to Chinese tech shares follows a pattern of moving in and out of the market over the past years. He snapped up shares of New York-listed Alibaba and JD.com at the end of 2022 as China was emerging from the pandemic, only to close out his positions in the second quarter of 2023 before reopening them months later.

Burry's latest moves suggest a bullish outlook on Chinese tech stocks, despite the challenges they face. As global investors cautiously return to the Chinese stock market, a sustainable growth in earnings will be crucial for the rebound to continue. The investor's track record and expertise in predicting market trends make his bets worth watching.

Burry's increased investments in Alibaba, JD.com, and Baidu could have a significant impact on Scion Asset Management's overall performance, given the substantial weight of these investments in its portfolio. Alibaba, JD.com, and Baidu are all prominent players in the Chinese tech sector, with strong market positions and growth potential. By boosting its stakes in these companies, Scion is betting on their ability to weather the current market volatility and capitalize on long-term growth opportunities. This strategy aligns with Burry's investment philosophy, which favors 'boring but lucrative' investments that offer steady performance and consistent growth.

However, the volatile nature of the Chinese market and the tech sector poses challenges to Scion's investment strategy. The ongoing trade tensions between the U.S. and China, regulatory pressures, and competition from domestic and international rivals could all impact the performance of these tech giants. Additionally, the recent slowdown in the Chinese economy and the potential for a global economic downturn could exacerbate these challenges.

In conclusion, Scion Asset Management's increased stakes in Alibaba, JD.com, and Baidu, along with the purchase of put options, reflect a bullish outlook on these Chinese tech giants. While this strategy could have a positive impact on Scion's overall performance, the volatile nature of the market and the tech sector presents significant risks that investors must carefully consider.